I surrender (my B/L)

Last week I was – as I often am – in an LC related
discussion. The topic was “Surrendered bill of lading” … and especially how to
deal with such when required by an LC. This discussion revealed some
interesting angles, and I thought that I would share those with you.

First of all it is important to stress, that there is no
universal definition of “Surrendered bill of lading” – so it may well be that
interpretation and handling differs between countries and continents and
shipping lines and carriers etc…

In any case – the interpretation that I most often hear is
that the B/L is “surrendered” by the shipper to the carrier. That is when the
shipper have received it from the carrier it is returned to the carrier. The
returning of the bill of lading is (or rather should be) followed by an
instruction regarding the release of the goods … this would normally be that
the goods must be released to the consignee mentioned on the bill of lading
upon arrival.

So far so good … but that opens for a number of highly
relevant questions:

Why would the parties choose to do it like that?

There may indeed be a number of good reasons – one is that
the transit time between the shipper and the consignee is short – so following
the normal paper trail, the documents would arrive later than the goods. By
doing it this way the goods can be released to the consignee upon arrival – and
release will not be delayed due to documents being stuck in the mail or in the
bank ….

But … why not just use a sea waybill made out to the
consignee?

This could work also – but there is one challenge; namely
the “right of control.” When using a (non-negotiable) sea waybill it is
normally so that the shipper has the right to control the goods until the
consignee mentioned on the sea waybill is claiming delivery. This problem is
“eliminated” when surrendering the full set of bill of lading. In such case the
goods will be released based on the instruction given by the shipper; and after
surrendering the full set bills of lading the shipper has no control over the
goods.

Fine … but still – would there not be a possibility of using
a sea waybill regardless of right of control?

Yes indeed – it is actually possible for the shipper to
transfer the right of control to the consignee. E.g. by ensuring that the
shipper transfers the right of control to the consignee. Bimco has suggested
the following wording (which should be added to the sea waybill):

“I, the Shipper (named in the Shipper Box on the face of
this Waybill) hereby transfer the right of control to the cargo carried under
this Waybill to the consignee (named in the Consignee Box on the face of the
Waybill).”

Read more about how to use the non-negotiable sea waybill in
LC transactions in my book “UCP 600 Transport Documents” - Appendix A: An
Article on the Non-Negotiable Sea Waybill and Chapter 4.2.3 “Article 21
Non-Negotiable Sea Waybill.”

Anyway – back to the “Surrendered bill of lading.” As
indicated there may indeed be good reasons to use such “model” – but there are
(at least) two core challenges:

First of all – as indicated – there is no universal
interpretation of what it actually means! Therefore it is vital that it is
based on a precise agreement between the parties!

Secondly – and closely related to the first one – when used
in LC transactions it simply is not sufficient merely to require a “Surrendered
bill of lading” in the LC! It must be spelled out in the LC what kind of
document – containing what kind of information must be presented. For example
it would most likely be a copy of a bill of lading – after all the intention is
that the original is surrendered to the shipping line – so it would make no
sense calling for an original. Bear in mind UCP 600 article 17(a): “At least
one original of each document stipulated in the credit must be presented.”
Also; is it sufficient that the document presented is simply stamped “Surrendered”
or is something else (on the document) required ….?

And last – but surely not least – it should be observed that
by doing it this way the goods will automatically be released to the consignee.
In an LC transaction the consignee is the applicant … so in this case document
acceptance and release of goods are totally detached from each other. Saying it
another way; if documents are discrepant they may be refused; and the
beneficiary (shipper) may not be paid – but the applicant may still receive the
goods ….

Of course the LC banks deal with documents and not with
goods (UCP 600 article 5) – but when LC requires a bill of lading (i.e. NOT a
Surrendered bill of lading), refusing the presentation means that the applicant
do NOT get possession of the original bill of lading; and consequently will not
get access to the goods …

As always – when using LC’s the key to success is clear and
unambiguous requirements. This is also the case here. The parties may well
choose to trade based on “Surrendered bills of lading” but in such case – they
must be precise as to the document(s) to be presented under the LC.

This being said – I will take this opportunity to raise the
flag for the non-negotiable sea waybill – with a “right of control” text (as
suggested above) … that could work as a perfect replacement of the “Surrendered
bill of lading” … if drafted in a good and clear way.